MUMBAI -- The Reserve Bank of India plans to introduce three to four gold-linked products in the next few months in an effort to bring 20,000 tonnes of gold held in households into the banking system, but the measure is unlikely to cut bullion imports sharply, a senior official said.

India is the largest importer of gold, which is its second biggest import item after oil and contributes around 10 percent to the total import bill.

Large gold imports are a worry for the government and the RBI, with the current account deficit shooting to a record high in the September quarter, pressuring the rupee and adding to inflationary pressures.

... Dispatch continues below ...

ADVERTISEMENT

How to profit in the new year with silver --
and which stocks to buy now

Future Money Trends is offering a special 16-page silver report with our forecast for 2013 that includes profiles of nine companies and technical analysis of their stock performance. Six of the companies have market capitalizations of less than $800 million and one company has a market cap of only $30 million. The most exciting of these companies will begin production in a few weeks and has a market cap of just $150 million.

Half of all proceeds from the sale of this report will be donated to the Gold Anti-Trust Action Committee to support its efforts exposing manipulation and fraud in the gold and silver markets.

The RBI plans to mobilise the unused gold by lending it to importers and exporters of the yellow metal, in a move it hopes will bring down the demand for physical gold.

It wants banks to encourage products linked to accepting physical gold as deposits and investing public money in gold related products, and extend loans against gold as collateral.

Indians own about 20,000 tonnes of gold, or three times the holdings of the U.S. Federal Reserve, in jewellery, bars, and coins.

"Overnight there won't be any reduction in imports, but people need to be made curious about new products," the RBI official with direct knowledge said.

"The main conduits of gold imports are banks, forming 50-60 percent of the total imports and supplies to jewellers. The way banks are suffering from huge non-performing assets, this is a good product to work on."

The RBI is likely to release next week its final report on issues related to gold imports and gold loans, the official said.

The RBI is designing products that could replace physical gold demand to yield similar returns, with easy liquidity and documentation.

Indian banks' total gold loans are worth 1 trillion rupees. Manappuram Finance and Muthoot Finance, two of the top gold loan financing institutions, together have loan books of 500 billion rupees, the official said, indicating a large business opportunity.

"The problem of gold imports can be solved only when the economy enjoys inflationary and macroeconomic stability," the official added.

Headline inflation has been above 7 percent in the last three years, prompting savers to invest in gold, stocks, and real estate, which yielded higher returns compared with bank deposits.

The RBI estimates gold imports to fall by 25 percent in the current fiscal year ending March to 750 tonnes from a record of 1,079 tonnes in the previous year due to a high import duty, a jump in prices, a slowdown in economic growth, and a month-long jewellers' strike.

India's current account deficit would had been lower by $6 billion at 3.9 percent in 2011-12 instead of 4.2 percent, had imports grown by an average of 24 percent instead of 39 percent, the RBI said in a recent report.
* * *

In addition to its precious metals storage facilities in Hong Kong, Switzerland, Toronto, and the United Kingdom, now with GoldMoney you can store gold and silver in Singapore in a high-security vault operated by Brink's Singapore Pte Limited. To celebrate the launch of this storage option, GoldMoney is offering a discount on buy and exchange fees at this vault for any orders above US$10,000 (or the equivalent) until January 31, 2013. Tthe gold buy rate is 0.98%, while the silver rate is 1.99%. Metal exchanges into Brink's Singapore will also be discounted for this period and will be charged at 0.78% for gold and 1.75% for silver. Simply place your order online and the above rates apply automatically until January 31, 2013, 15.00 UK time. To find out more about the new vault, please visit:

GoldMoney customers can take delivery of any number of gold, silver, platinum, and palladium bars from any GoldMoney vault, as well as personally collect their bars stored in the Hong Kong, Switzerland, and U.K. vaults.

It's easy to open an account, add funds, and liquidate your investment. For more information, visit: